Williams %R

The William's percent range, short also William's % R, is an indicator of technical analysis in stock trading. This index was developed in 1966 by Larry Williams, to indicate overbought and oversold conditions.

Calculation

The calculation is done using the formula

Being the closing price of C, H, the maximum price of the last x days, for L the low price of the last x days used. We recommend the use of the values ​​of the last 14 days, but it is also smaller time window are selected.

The result is 0 to -100. Being close to 0 indicates that the markets are oversold ( values ​​from 0 to -20 ). By turning the signal down creates a sell signal. Values ​​from -80 to -100 indicate oversold conditions. By the turn of the indicator upwards creates a buy signal.

Application

The William's percent range is one of the oscillators, and should display a corresponding reversal in the trend of the share price. It should be noted that the fulfillment of an " overbought " - or " oversold " region does not indicate an immediate action, since the price of ( a stock or other underlying instrument ) can still move for a long time on this course, high or low of. It is usually recommended an adjustment of futures prices to be seen before the action is set.

The shorter the period of application for the William's % R, more volatile and therefore less reliable the results.

The William's % R is considered to be very flexible and can be used in all markets and all time variants of technical analysis. Especially sideways movements of courses can be well analyzed.

Criticism

Due to the stochastic processes in the markets and the work of Louis Bachelier on this topic, observance of historical values ​​for the prediction of future developments is to enjoy very controversial and with caution.

The random walk theory of Bachelier and deduced efficient market hypothesis shows that even at low efficiency historical data on which the William's % R only uses have already been processed completely in the course and at the time of publication no longer have any predictive value.

Although the efficient market hypothesis has been criticized for several decades, primarily by anomalies such as the January effect, most of these anomalies have disappeared again after it became known, and the like must be adhered to when William's % R. The more market participants act according to this indicator, the lower the suitability of the effect for a prognosis.